Friday, February 6, 2015

Greece needs debt restructuring

On January 30th, Paul Krugman wrote in his NYT column: "In the five years (!) that have passed
since the euro crisis began, clear thinking has been in notably
short supply. But that fuzziness must now end. Recent events in
Greece pose a fundamental challenge for Europe: Can it get past
the myths and the moralizing, and deal with reality in a way that
respects the Continent’s core values? If not, the whole European
project — the attempt to build peace and democracy through shared
prosperity — will suffer a terrible, perhaps mortal blow."

Krugman discusses the myth that Athens has
used the rescue package of EU and IMF loans for itself. "The truth, however,
is," he says, "that the
great bulk of the money lent to Greece has been used simply
to pay interest and principal on debt. In fact, (...) to oversimplify
things a bit, you can think of European policy as involving a
bailout, not of Greece, but of creditor-country banks, with the
Greek government simply acting as the middleman — and with the
Greek public, which has seen a catastrophic fall in living
standards, required to make further sacrifices so that it, too,
can contribute funds to that bailout."

Another myth Krugman tackles is that Greece would fully repay its debt. "Now, the truth is," he says, "that nobody believes that Greece can fully repay. So why not
recognize that reality and reduce the payments to a level that
doesn’t impose endless suffering? Is the goal to make Greece an
example for other borrowers? If so, how is that consistent with
the values of what is supposed to be an association of sovereign,
democratic nations?"

Debt reduction would be rational, argues Krugman. "Let Greece run smaller but still positive surpluses, which would
relieve Greek suffering, and let the new government claim success,
defusing the anti-democratic forces waiting in the wings.
Meanwhile, the cost to creditor-nation taxpayers — who were never
going to get the full value of the debt — would be minimal. Doing the right
thing would, however, require that other Europeans, Germans in
particular, abandon self-serving myths and stop substituting
moralizing for analysis."

Krugman's hope has not been fulfilled these past days, when both Greek finance minister Yanis Varoufakis and prime minister Alexis Tsipras asked in European capitals for support to Greece's plan to restructure debt and end austerity.

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

"The only thing we ask for," said Varoufakis in an interview with German public broadcaster ARD on February 4, 2015, "is to give us time until th end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners."

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

About Me

As a kid I liked numbers and the sound of strings. I considered studying engineering but chose social sciences because of my interest in people. I combine a theoretical interest with a practical, social approach which brought me to the sphere of policy research. I am interested in reducing the disparity between poor and rich, between the powerful and the less powerful.
In 1973 and 1982 I lived in Latin America. In the mid-1980s, I was able to create an international forum to discuss the functioning of the international monetary system and the debt crisis, the Forum on Debt and Development (FONDAD). I established it with the view that the debt crisis of the 1980s was a symptom of a malfunctioning, flawed global monetary and financial system.
I was one of the driving forces behind the creation of the European Network on Debt and Development that was established at the end of the 1980s to help put pressure on European policymakers.
In 1990, before the beginning of the Gulf War, I cofounded the Golfgroep, a discussion group about international politics comprising journalists, scientists, politicians and activists that meets regularly.
The website of FONDAD is www.fondad.org